Russia, Saudi Arabia agree to freeze oil output to prevent price drop

The world's two largest oil producers

Russia and three members of the Organization of Petroleum Exporting Countries (OPEC) - Saudi Arabia, Venezuela and Qatar - agreed to freeze oil production at January's level if other producers do the same, Russian Energy Minister Alexander Novak said in a statement.

Oil prices last month plummeted to their lowest point in years - below 30 dollars a barrel - in a rout that has wreaked havoc on oil-dependent economies, including Russia and Venezuela. As recently as two years ago, prices per barrel were above 100 dollars.

The deal is "an effort to prevent the oil price from sliding below 30 dollars per barrel while Russia and OPEC are waiting for their main prize: a steep fall in US shale production," said Chris Weafer, a senior partner at Russian-focused investment consultancy Macro Advisory.

"Critically, the agreement does not include Iran. An expected increase in Iranian production is, along with still high US shale output, the big concern for the oil market," Weafer told dpa.

Artem Konchin, senior oil analyst at Otkritie, Russia's largest independent financial group by assets, said that on Wednesday there will be a meeting with Iran and Iraq to discuss the same approach.

The deal was reached by the four countries' energy ministers during a meeting in the Qatari capital, Doha, according to the statement on the Russian Energy Ministry's website.

Qatari Energy Minister Mohammad bin Saleh al-Sada confirmed that a deal to freeze oil output had been made, according to broadcaster Al Arabiya.

"The reaction in the market was somewhat muted, as the market hoped for a cut - rather than a freeze - of output," said Konchin.

Konchin agreed that the deal's upside is that it could prevent oil prices from tumbling further.

"For Russia, this will help to avoid a larger-than-forecast budget deficit and keep inflation on a downward year-on-year trajectory," he told dpa.

Weafer predicted that the news will raise prices in the short term, "but it does nothing to address the basic problem. The oil market is currently oversupplied by up to 1.5 million barrels per day."

Russia and Saudi Arabia are currently producing oil at near record high levels, so freezing output means nothing because it is doubtful that they could produce much more, Weafer said.

Last month, Russia's former finance minister, Alexei Kudrin, predicted that oil prices could fall as low as 16 dollars without intervention.

Last update: Tue, 16/02/2016 - 17:07

More from World

US astronaut John Glenn - "ultimate hometown hero" - dies at age 95

Former astronaut and US senator John Glenn, who shot to fame in 1962 as the first American to orbit the Earth, died...

Gambian president-elect says he will reverse decision to leave ICC

Gambia will reverse its decision to leave the International Criminal Court, president-elect Adama Barrow announced...

Tsunami threat declared over for Solomon Islands after massive quake

The tsunami threat from Friday's magnitude-7.8 earthquake near the Solomon Islands has passed, says the Pacific...

Saudi Arabia "playing proxy wars," Boris Johnson says in latest gaffe

British ally Saudi Arabia is "puppeteering and playing proxy wars" in the Middle East and, like Iran, is "twisting...

Russia: Syrian military suspends Aleppo attacks to allow evacuation

The Syrian military has suspended its attacks on militant-held eastern Aleppo to let civilians be evacuated to...